Part of my unique ability is to help clients think and act in the most strategically efficient way possible. It isn’t necessarily to save pennies everywhere we can, but to save the “best” pennies. In other words, the ones that have the most impact.
I visited a client this past week who makes a good example of strategic efficiency. They are in a highly regulated business, so they take steps to squeeze the most impact out of the pennies they save. Even in innocuous areas like invoicing, there is substantial impact.
For example, when bills are processed and delivered properly, well over 100,000 go out each day. If they are not prepared properly, the cost of delivering them can increase by $1000 per day, possibly more. When you send this many bills a month, there are a number of tactics you can use to save as little as $0.001 to $0.003 per bill.
While that seems like a tiny savings, at scale it adds up to real money.
Saving $30,000 a month, a penny at a time
When they put systems in place to do things in the most strategically efficient manner, they could identify *daily* savings of $1000 per day, every work day. That’s hard money, not touchy feely savings that don’t show up on a bank statement. $1000 per day adds up in a hurry, regardless of the size of the business.
It isn’t just about handling these bills properly. It’s also about handling them on time.
Should these bills go out late, you can imagine that cash flow is negatively affected in a substantial way because clients who don’t get bills on time wont pay them on time. If everything goes well, on certain days of the month, they might be able to “loan” money using short term finance mechanisms.
Process affects transit time
If the bills are late going out by only an hour, they can miss their transit window. If they make their window, it all but guarantees invoice delivery on the next business day. If they miss the window, it will mean bills arrive late and believe it or not, it will mean some customers pay later than normal.
The cascading effect of these tiny shifts can hamper cash flow from that set of customers for the next month. Some days of the month, that may mean they have to manage overall cash flow far more carefully, simply by how things come together that month. Timing matters.
If the processing that gets these bills out the door has problems frequently, it can put pressure on cash flow that affects the entire business.
Yes, but we don’t mail bills
You might be thinking that this “old school” business could gain from efficiencies like emailed bills and other electronic transaction processing. They do, however they are not in a position for force their entire customer base away there. As with some of your clientele (I suspect), there are some who want a paper bill, and others who require a paper trail, even today.
For those invoices, on-time delivery still affects payment patterns and thus, cash flow. Electronic delivery also has requirements to keep it strategically efficient, such as delivery management and bounce processing. If there are no systems in place to monitor delivery and assure that every single bill arrived, those bills will not likely get paid. If they arrived late, they’ll likely be paid late.
“Oh, it’s just email delivery” isn’t simply a minor annoyance when it becomes a cash flow impact factor.
The boring, innocuous back office
Those “boring”, innocuous back office processes may not be as exciting as the innovative, front-line business things you’re doing to close sales and retain clients. Their level of efficiency, quality, and timeliness has a broad impact on the day to day operation of your business.
Whether these processes are based on paper, email, electronic transactions or a combination of all of those things, they (and the company) will benefit from constant improvement and fall back protections. You (and everyone else) will sleep better at night because you know these things are more consistent and more resilient.
Your back room processes fuel what’s going on in research and development, sales and elsewhere. Be sure to make them as strategically efficient as possible.